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A Short Note on Discrimination and Favoritism in the Labor Market

Author

Listed:
  • Nicolas Salamanca

    () (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; ARC Centre of Excellence for Children and Families over the Life Course, and; Institute for the Study of Labor (IZA))

  • Jan Feld

    (Victoria University of Wellington)

Abstract

We extend Becker’s model of discrimination by allowing firms to have discriminatory and favoring preferences simultaneously. We draw the two-preference parallel for the marginal firm, illustrate the implications for wage differentials, and consider the implied long-run equilibrium. In the short-run, wage differentials depend on relative preferences. However, in the long-run, market forces drive out discriminatory but not favoring firms.

Suggested Citation

  • Nicolas Salamanca & Jan Feld, 2016. "A Short Note on Discrimination and Favoritism in the Labor Market," Melbourne Institute Working Paper Series wp2016n23, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  • Handle: RePEc:iae:iaewps:wp2016n23
    as

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    File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2016n23.pdf
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    References listed on IDEAS

    as
    1. Anthony Edo & Nicolas Jacquemet & Constantine Yannelis, 2013. "Language Skills and Homophilous Hiring Discrimination: Evidence from Gender- and Racially-Differentiated Applications," Documents de travail du Centre d'Economie de la Sorbonne 13058, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    2. Jan Feld & Nicolás Salamanca & Daniel S. Hamermesh, 2016. "Endophilia or Exophobia: Beyond Discrimination," Economic Journal, Royal Economic Society, vol. 126(594), pages 1503-1527, August.
    3. Jacquemet, Nicolas & Yannelis, Constantine, 2012. "Indiscriminate discrimination: A correspondence test for ethnic homophily in the Chicago labor market," Labour Economics, Elsevier, vol. 19(6), pages 824-832.
    4. Chaim Fershtman & Uri Gneezy & Frank Verboven, 2005. "Discrimination and Nepotism: The Efficiency of the Anonymity Rule," The Journal of Legal Studies, University of Chicago Press, vol. 34(2), pages 371-396, June.
    5. Matthew S. Goldberg, 1982. "Discrimination, Nepotism, and Long-Run Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 97(2), pages 307-319.
    6. repec:hal:cesptp:hal-00745109 is not listed on IDEAS
    7. Kerwin Kofi Charles & Jonathan Guryan, 2008. "Prejudice and Wages: An Empirical Assessment of Becker's The Economics of Discrimination," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 773-809, October.
    8. repec:hal:journl:hal-00745109 is not listed on IDEAS
    9. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, March.
    10. Cahuc, Pierre & Carcillo, Stéphane & Zylberberg, André, 2014. "Labor Economics, second edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262027704, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Wage gap; nepotism; firm preferences; long-run equilibrium;

    JEL classification:

    • J70 - Labor and Demographic Economics - - Labor Discrimination - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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